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How much $ do firms borrow for P2?.



P2techers:
Below is a comment from Michigan P2 Program Management staff, Sharon Goble, concerning P2 loans.  You can respond to her at gobles@state.mi.us

In response to Burt Hamner's inquiry regarding financial threshold for small business implementation of P2: 

I manage Michigan's relatively new small business P2 loan program which offers small businesses of 100 employees or less, loans of up to $100,000 at an interest rate of 5%.  I don't think that one can provide a single answer to a broad question like this.  Small businesses are as unique and different as individuals are when it comes to taking on debt. Michigan has over 350,000 small businesses (100 employees or less) covering everything from agriculture, manufacturing, to service firms. Access to credit is individually dependent on each business's capacity to service (repay) the debt. 

I agree with Kelly Moran in that businesses make their decisions based on their perception of the financial benefit to be gained.  What we're doing in Michigan is promoting the economic aspect of the P2 loan program as well as the environmental benefits. Through our Retired Engineers Technical Assistance Program (RETAP) which is now 6 years old, we obtained economic data on P2 implementation savings, and the payback period on a P2 investment. The data is rough but in general, the small businesses in Michigan who have implemented P2 have saved between $2,000 and $53,000 PER YEAR. The payback period on the investment is generally 1 to 3 years-in other words-VERY SHORT. Businesses like this. And in a number of cases, the payback was less than a year. We also compare the interest cost savings for small businesses. For instance, on a $100,000 loan with a 5 year maturity, the difference in interest cost between Michigan's 5% loan program and a market interest rate of 11% (ie. prime plus 1.5) is over $17,500. With this type of information, businesses can then evaluate the financial benefits of pursuing a low interest loan for P2. With Michigan's tight labor market, those savings could be used to attract the labor needed at the small business.

Most of the small businesses that we've talked to respond positively to this information, as it gives them some concrete data for financial planning. Other hurdles for our program to overcome are that it takes us 2-3 months to disburse the loan proceeds. We need to catch a business in the early planning stage so they can budget our disbursement timeframe into their implementation plans.

So far, we've had applications from the agriculture sector, metal finishers, automotive, medical professional, plastics manufacturing and dry cleaners-a wide variety of businesses making loan requests ranging from $50,000 to $100,000.  I think the demand for P2 loan is there. I think it's a matter of how you "market" the economic info, and how timely you can disburse the loan proceeds. 

Sharon Goble
Program Manager
P2 Small Business Loan Program
Pollution Prevention Section
Environmental Assistance Division
Phone: 517-241-8280
Fax: 517-335-4729
e-mail: gobles@state.mi.us



Wendy Fitzner, Chief
Program Management Unit
Pollution Prevention Section
Environmental Assistance Division
Michigan DEQ
P.O. Box 30457
2nd Floor Town Center, 333 S. Capitol
Lansing, MI  48909-7957
517-373-8798
517-335-4729 (fax)
fitznerw@state.mi.us